Costs Award — Ontario Employment Law
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About Costs Award
In Ontario employment litigation, winning a lawsuit is only part of the financial equation. The other critical component is the 'costs award.' Governed by the Courts of Justice Act and the Rules of Civil Procedure, a costs award is an order made by a judge directing the unsuccessful party to pay a portion of the successful party's legal fees and disbursements. It is important to distinguish costs from damages; while damages compensate an employee for lost wages or human rights breaches, costs are specifically designed to partially reimburse the winner for the expense of bringing or defending the lawsuit.
Ontario operates on a 'loser pays' principle, meaning that if you sue your employer for wrongful dismissal and lose, you generally risk having to pay a portion of their legal bills, known as 'adverse costs.' However, a costs award rarely covers a lawyer's entire bill. Courts typically award fees on a 'partial indemnity' scale, which usually covers roughly 40% to 60% of the actual legal expenses. In certain situations—such as when a party engages in unreasonable litigation tactics or rejects a formal Rule 49 Offer to Settle that was ultimately lower than the trial judgment—the court may award 'substantial indemnity' costs, which covers a much higher percentage as a deterrent or reward.
Courts also heavily weigh the principle of proportionality, particularly in cases under the Simplified Procedure (Rule 76). Judges will scrutinize whether the legal fees spent on a wrongful dismissal claim are reasonable compared to the actual severance awarded (for instance, evaluating the Bardal factors for a short-service employee should not generate a six-figure legal bill). In exceptional circumstances, case law has shown that if an unsuccessful plaintiff faces extreme financial hardship (impecuniosity), a judge might significantly reduce or waive the costs awarded to the successful employer to preserve public access to justice.
Navigating the financial risks and settlement strategies of an employment dispute requires careful assessment, as courts examine the highly specific, unique conduct of both parties before finalizing any cost amounts. Because of these distinct financial liabilities, retaining appropriate professional legal guidance early in the dispute is crucial.
Frequently Asked Questions
What exactly is a costs award in an employment lawsuit?
A costs award is an order made by a court at the end of a legal proceeding requiring the losing party to reimburse the winning party for a portion of their legal fees and disbursements. It is separate from the severance or damages awarded for the actual employment dispute.
If I win my wrongful dismissal case, will the court force my employer to pay 100% of my legal fees?
No, this is a common misconception. Ontario courts generally award costs on a 'partial indemnity' scale, which realistically only reimburses about 40% to 60% of your total legal bill, meaning you will still have out-of-pocket expenses even if you win.
What is the deadline or timeline to request a costs award in Ontario?
A request for costs is usually addressed immediately after the trial judgment is rendered. The judge normally dictates a strict timeline, typically 15 to 30 days following the decision, for both parties to exchange and submit written outlines of their legal costs (costs submissions).
How does making an 'Offer to Settle' affect the costs I might get?
Under Rule 49 of Ontario's Rules of Civil Procedure, if you make a formal, written settlement offer that the employer rejects, and you later win an amount at trial that is equal to or better than your offer, the judge will typically award you much higher 'substantial indemnity' costs from the date of that offer.
If I have zero savings and lose my lawsuit against a massive corporation, do I still have to pay their costs?
Usually, yes, as the 'loser pays' rule applies to everyone. However, in rare Ontario cases, judges have denied costs to a successful employer if the losing employee proved extreme financial destitution (impecuniosity) and ordering costs would severely penalize access to justice.
At what stage in my termination dispute should I talk to a lawyer about the risk of adverse costs?
You should seek strategic legal counsel before rejecting any initial severance offer and definitely before filing a formal Statement of Claim, so you can thoroughly map out your potential financial exposure if the litigation does not turn out in your favour.
Can my employer's bad behaviour during the lawsuit increase my costs award?
Yes. If an employer plays games, intentionally delays the process, hides documents, or acts aggressively during litigation, the judge can penalize this conduct by awarding you a higher scale of costs to punish their misuse of the court system.
Common Scenarios
- An employee formally offers to settle their wrongful dismissal claim for $40,000; the employer refuses, but the judge later awards $55,000 at trial, triggering an elevated substantial indemnity costs award against the employer.
- A mid-level supervisor wins a $15,000 severance claim using Ontario's Simplified Procedure, but the judge refuses to award their requested $30,000 in legal costs because the fees are entirely disproportionate to the damages recovered.
- A single parent living paycheck to paycheck is unsuccessful in their human rights and termination claims; recognizing the worker's absolute lack of assets, the judge exercises discretion to deny the victorious company's request for out-of-pocket costs.
- An employer deliberately obscures key payroll data and forces unnecessary procedural motions to string out a lawsuit, leading the judge to award the successful plaintiff a much higher costs amount as a direct penalty for the employer's litigation misconduct.
What You Should Know
- Make strategic, reasonable Rule 49 Offers to Settle early in your lawsuit to protect yourself and maximize potential costs recovery if the matter proceeds to trial.
- Ensure your litigation strategy is strictly proportionate to the monetary value of your severance claim, as judges will heavily discount cost claims that seem excessive compared to the damages at stake.
- Keep detailed, organized records of all legal invoices and disbursements paid throughout your lawsuit, as you will need an itemized bill of costs to successfully claim these amounts from the court.
- Have a transparent conversation with an employment lawyer about your personal risk tolerance and the realities of 'adverse costs' before launching a claim, so you aren't blindsided by the financial realities of losing.
Featured Cases
F. v. Prep Doctors Corp. et al
2025 ONSC 5383 (CanLII) · 2025-09-22Costs for Abandoned Motion in Employment Case
This is a procedural costs ruling in an employment law matter where the court addressed the consequences of the defendants' motion being deemed abandoned. The court determined whether the plaintiff was entitled to immediate costs under rule 37.09(3) and whether substantial indemnity costs should be awarded due to alleged delaying tactics.
S. v. Syra Group Holdings
2025 ONCA 265 (CanLII) · 2025-04-07Security for Costs Motion Dismissed in Wrongful Dismissal
This was a motion for security for costs at the Court of Appeal in a wrongful dismissal case. The moving party employee, J.S., sought security for costs of $100,000 from the appellant employer, Syra Group Holdings. The trial judge had awarded the employee $175,000 in damages and substantial indemnity costs. The Court of Appeal dismissed the motion because the employee could not obtain a security for costs order against the employer under the rules and the employer's appeal was not clearly without merit.
Taylor v. Hanley Hospital Inc.
2023 ONCA 25 (CanLII) · 2023-01-13Taylor v. Hanley Hospitality Inc.: Costs Order
This was an appeal to the Court of Appeal regarding a costs order following an earlier decision where the court allowed the employee's appeal from the dismissal of her constructive dismissal action. Candace Taylor appealed against Hanley Hospitality Inc. o/a Tim Hortons. The Court of Appeal had previously set aside the motion judge's order and fixed the costs of the appeal to the appellant. The Court ordered the respondent to pay the appellant partial indemnity costs of the motion in the all-inclusive amount of $8,500.
A. v. The Hospital for Sick Children
2015 ONCA 804 (CanLII) · 2015-11-23A. v. Hospital for Sick Children - Employee Capacity
This is a motion to review an order of a single judge of the Court of Appeal dismissing a motion for a stay and for an order for a capacity assessment in a wrongful dismissal action. The plaintiff, an unrepresented former lab technician, brought numerous proceedings attempting to show she lacked legal capacity in order to suspend a limitation period or explain delays. The motion judge found insufficient evidence to rebut the presumption of capacity. This court affirmed the motion judge's decision, noting the plaintiff's treating physicians refused to declare her incapable despite her persistent requests, and directing her to seek an assessment under the Substitute Decisions Act if she wishes. The motion was dismissed.
P. Estate v. Galway-Cavendish and Harvey (Township)
2013 ONCA 669 (CanLII) · 2013-11-05Punitive Damages Reduced on Appeal for Malicious Prosecution
This is an appeal to the Court of Appeal from the trial judge's decisions on two re-trials, one for malicious prosecution and the other on the quantum of punitive damages. The employee was dismissed and then faced criminal charges that the trial judge found were initiated by the municipality withholding exculpatory evidence. The trial judge awarded $1 for malicious prosecution and $550,000 for punitive damages. The Court of Appeal allowed the appeal in part; the malicious prosecution finding stands, but the punitive damages award was reduced to $450,000 as the trial judge failed to consider the punitive elements of the other compensatory awards and costs already granted to the employee.
B. et al v. P. et al
2013 CanLII 54779 (ON SC) · 2013-09-03Union Class Action Costs: 15-Year Litigation
This is a costs ruling in a 15-year class action litigation involving union officers and members alleging breaches of union obligations. The court addressed whether the defendants' unlawful conduct during litigation precluded cost recovery despite their success on the merits. The plaintiffs and defendants were ordered to bear their own costs.
M. v. Canadian National Railway Company
2012 ONSC 6838 (CanLII) · 2012-12-03Class Action Costs: Employee Misclassification Case
This is a costs ruling arising from a certification motion in a class action lawsuit concerning the misclassification of employees and unpaid overtime. The defendant, Canadian National Railway Company, sought over $1 million in costs, but the court reduced the award to $475,000, considering the public interest nature of the litigation and novel legal issues.
S. v. Bank of Montreal
2012 ONSC 5437 (CanLII) · 2012-09-26Constructive Dismissal: Bonus Dispute & Costs
This case involves a constructive dismissal claim by an employee against the Bank of Montreal regarding a dispute over the form of a bonus payment (cash versus restricted share units). The defendant prevailed on the summary judgment motion. Additionally, the court addressed procedural issues where the plaintiff refused to consent to setting aside a noting in default, resulting in substantial indemnity costs being awarded against the plaintiff for that specific motion.
F. v. Canadian Imperial Bank of Commerce
2010 ONSC 1036 (CanLII) · 2010-02-12Class Action: Unpaid Overtime Claim Dismissed with Costs Award
A class action certification motion involving allegations of systemic failure to pay overtime wages. The court ruled that the claim did not raise novel or significant questions in federal employment law and awarded costs to the defendant on a partial indemnity basis.
B. v. Hudson's Bay Company
2008 ONCA 690 (CanLII) · 2008-10-10B. v. Hudson's Bay Company - Costs Decision
This is a costs decision of the Court of Appeal for Ontario following an earlier appeal decision. In the main appeal, the court allowed the employer's appeal and dismissed the representative plaintiffs' cross-appeal regarding entitlement to pension surplus for transferred employees. The parties could not agree on costs. The court decided that the costs of both parties should be paid from the pension fund on a full indemnity basis, fixing the appeal costs and remitting the trial costs to the trial judge for assessment.
W. v. 1124660 Ontario Limited
2007 CanLII 27588 (ON SC) · 2007-07-13Wrongful Dismissal Case: Costs Denied Due to Plaintiff's Impecuniosity
A wrongful dismissal case where the plaintiff, a single mother with no assets or significant income, was unsuccessful in her claims. The court addressed whether the plaintiff’s impecuniosity should affect the award of costs, ultimately denying costs to the defendants due to the plaintiff’s inability to pay and the public interest in access to justice.
S. v. Kohler Canada Co.
2007 CanLII 1863 (ON SC) · 2007-01-29Wrongful Dismissal: Inadequate Severance and Costs Awarded
A wrongful dismissal case where the plaintiff was terminated without cause and received an inadequate severance package. The plaintiff had to litigate to recover reasonable notice damages, and the court considered whether the defendant’s conduct justified the costs awarded. The case also involved a detailed analysis of the reasonableness of the plaintiff’s legal costs.
L. v. Jacques Whitford & Associates Ltd.
2006 CanLII 22657 (ON SC) · 2006-06-30Wrongful Dismissal: Costs Award Determined Under Simplified Procedure
A wrongful dismissal case under the Simplified Procedure where the plaintiff was awarded damages. The court considered the appropriate costs award, focusing on fairness, proportionality, and the impact of litigation conduct on the costs determination.
S. v. I.B.M. Canada Ltd.
2005 CanLII 39896 (ON SC) · 2005-10-12Wrongful Dismissal Case: Damages and Costs Awarded
A wrongful dismissal case where the plaintiff was awarded damages and aggravated damages, with the jury finding no just cause for dismissal. The case also involved legal disputes over the appropriate costs award, including whether punitive damages justify higher costs and the validity of settlement offers under Rule 49.
B. v. Etobicoke Ironworks Ltd.
2005 CanLII 36256 (ON SC) · 2005-10-11Wrongful Dismissal: Reasonableness of Procedure and Costs Award
A wrongful dismissal case where the plaintiff alleged dismissal without cause and sought damages for notice, overtime, vacation pay, and profit sharing. The court found it reasonable to proceed under the ordinary procedure due to the uncertainty of damages and the range of reasonable notice.
J. v. Ontario Human Rights Commission
2001 CanLII 24025 (ON CA) · 2001-03-08J. v. Ontario Human Rights Commission - Costs Appeal
This is an appeal by the applicant of an assessment of a party-and-party bill of costs for a motion for leave to appeal and a one-day appeal. The applicant previously lost an appeal where he argued that his political beliefs were protected under "creed" in the Human Rights Code. The Assessment Officer assessed the successful employer's costs at $39,641.14, including a $35,000 counsel fee. The Court of Appeal found the $35,000 counsel fee unreasonably high because the employer's counsel argued only one legal question they had already argued below and did not argue the Charter issue. The court reduced the counsel fee to $17,500.
S. v. Reebok Canada Inc.
1994 CanLII 7387 (ON SC) · 1994-12-12Wrongful Dismissal: Middle Management Employee Awarded 10 Months Notice
A wrongful dismissal case where an employee in a middle management position was terminated without just cause due to corporate restructuring. The court determined 10 months as reasonable notice based on independent databases and case law. The plaintiff was awarded solicitor and client costs of $3,800 after succeeding to a greater extent than under the offer to settle.
C.A.W., Local 458 v. White Farm Manufacturing Canada Ltd. (H.C.J.)
1989 CanLII 4128 (ON SC) · 1989-01-23Pension Surplus: Union Entitlement in Receivership
This is a costs ruling in a dispute concerning employee entitlements to surplus funds in a defined benefit pension plan funded solely by the employer. The court addressed whether the surplus formed part of the trust fund and upheld the certainty of the trust, confirming employees were entitled to the surplus. Costs were awarded to all parties out of the pension fund on a solicitor-and-client basis.